1 June 2014

Ethiopia: Construction Company Brought Into United Vs Roads Authority Legal Wrangle

United and the ERA were given time to settle the dispute by themselves, but no resolution could be found

Tibeb Construction Plc has became a third party defendant to the 86.6 million Br charge by the Ethiopian Roads Authority (ERA) against the first defendant United Insurance Company S.C (UNIC).

The decision came last Friday, May 30, 2014, when the presiding judge at the Federal High Court's Sixth Civil Bench, Shemsu Sirgaga, ruled on the petition by United for the addition of Tibeb as its codefendant.

After deciding for the addition of Tibeb as UNIC's co-defendant, the Judge ordered the contractor to submit its statement of defence on June 23, 2014.

The suit was taken to court by the ERA on July 24, 2013, claiming for a payment of 139.2 million Br by UNIC for the guarantee it had given to Tibeb in the form of an advance payment and performance bonds in the execution of a contract for the construction of a 47Km road that extends from Sanja to Kerekera, in the North Gondar Zone of the Amhara Region.

The ERA filed the suit following the termination of this constriction deal made with Tibeb, in February 2013. The Authority signed the contract for more than half a billion Birr on February 3, 2009. The insurer was, thus, the guarantor of the contractor for the due performance of the contract, as well as for the advance payment of 20pc of the contract price.

Nonetheless, the contractor did not finalise the project within the agreed three years and that led to the Authority extending the duration for an additional six months. Yet, at the end of the additional six months, the contractor was able to achieve only 55.3pc of the total project.

This led to the termination of the deal on February 13, 2013 and the remaining work was later awarded to the China Railway Engineering Group (CREG) on March 5, 2014, at a cost of 786.8 million Br.

The Authority paid the Tibeb a total of 123.6 million Br as an advance payment, including close to 25 million Br for the purchase of construction materials, says the ERA's charge.

After the deal was terminated, out of this sum, the Authority was able to recollect 39 million Br in the form of deductions from payments made to the contractor for the 55pc of work completed according their deal.

United provided a guarantee for 84.5 million Br, which the contractor has taken from ERA, as a payment in advance. It also guaranteed for 54.7 million Br pledge as a performance bond. The remainder was made up from nine percent legal interest, says the charge.

United replied to the charge on October 16, 2013, and the hearing was set to take place on November 21, 2013. However, on that day the parties told the court that United paid 52.6 million Br to the ERA and they were conducting negotiations to settle the problem amicably and requested the Court for additional time to finalise the settlement.

Following the request, the judge gave them a period of five months to resolve their difference. However, they have now asked for an additional 18 days when they came on the adjournment date, April 3, 2014. But, they showed up with no yielding solution at the Court's session on May 21. Rather, on this date, United requested the court to order for the inclusion of Tibeb in the charge as a defendant

During last Friday's session, the judge accepted the request of United for the inclusion of Tibeb to the case, and ordered the newly added defendant to submit its written statement of defence on June 23, 2014, adjourning the date of the hearing to July 4, 2014.

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